Performances of Value Strategy and Growth Strategy: Why They Receive Attention from Proponents of Standard Asset Pricing Theory

By Liza Marwati Mohd Yusoff, M. Fazilah Abdul Samad and Noor Azlinna Azizan.

Published by The International Journal of Science in Society

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Unlike other trading strategies, performances of Value strategy and performances of growth strategy have received considerable attention from the proponents of the standard asset pricing theory. The paper attempts to excavate the reason for such attention is given to the two strategies. The excavation reveals that the reason revolves around the concept of rational investors which is the antecedent of informational efficient market that in turns is an assumption in the theory of asset pricing that is pertinent for the model of Capital asset pricing model (CAPM) developed based on the theory to be a valid model for measuring normal return on portfolios or on individual shares. If any of the two strategies manage to deliver abnormal return or return higher than return gained from adhering to passive investment strategy, then the ability is used by the proponents of theory of Behavioral Finance as evidence that share investors are irrational that refutes the concept of rationality aforementioned. Indirectly, the refutation would mean the CAPM should fall disuse.

Keywords: Asset Pricing Theory, Behavioral Finance, Rationality, Overreaction, Underreaction

The International Journal of Science in Society, Volume 1, Issue 1, pp.1-12. Article: Print (Spiral Bound). Article: Electronic (PDF File; 1.569MB).

Liza Marwati Mohd Yusoff

Lecturer in Finance, School of Business Management, National University of Malaysia, Bangi, Selangor, Malaysia

Liza Marwati has been working as a finance lecturer since 10 years ago. She is now pursuing her PhD (Investment)in University of Malaya, Kuala Lumpur, Malaysia. Asset pricing theory has been her research field of interest. Thusfar, she had publihed five articles in refeered journals. Some of the journals are listed in Scopus directory and Cabell directory.

Dr. M. Fazilah Abdul Samad

Lecturer, Department of Finance, University of Malaya, Kuala Lumpur, Wilayah Persekutuan, Malaysia

Dr. Noor Azlinna Azizan

Lecturer, Institute of Mathematics, Faculty of Sciences, University of Malaya, Kuala Lumpur, Wilayah Persekutuan, Malaysia